MAPF Portfolio Composition: May 2011

Turnover increased in May, to about 23%.

Trades were, as ever, triggered by a desire to exploit transient mispricing in the preferred share market (which may be thought of as “selling liquidity”), rather than any particular view being taken on market direction, sectoral performance or credit anticipation.

MAPF Sectoral Analysis 2011-5-31

HIMI Indices Sector

Weighting

YTW

ModDur

Ratchet

0%

N/A

N/A

FixFloat

0%

N/A

N/A

Floater

0%

N/A

N/A

OpRet

0%

N/A

N/A

SplitShare

9.2% (+4.4)

6.30%

6.34

Interest Rearing

0%

N/A

N/A

PerpetualPremium

0.0% (0)

N/A

N/A

PerpetualDiscount

12.5% (+5.7)

5.68%

14.34

Fixed-Reset

10.2% (+2.1)

3.18%

2.75

Deemed-Retractible

57.5% (-12.5)

5.73%

7.99

Scraps (Various)

9.7% (-0.3)

8.70%

9.17

Cash

+0.9% (+0.6)

0.00%

0.00

Total

100%

5.75%

8.14

Totals and changes will not add precisely due to rounding. Bracketted figures represent change from April month-end. Cash is included in totals with duration and yield both equal to zero.

DeemedRetractibles are comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31, in addition to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: Seeking NVCC Status and the January, February and March, 2011, editions of PrefLetter for the rationale behind this analysis.

The “total” reflects the un-leveraged total portfolio (i.e., cash is included in the portfolio calculations and is deemed to have a duration and yield of 0.00.). MAPF will often have relatively large cash balances, both credit and debit, to facilitate trading. Figures presented in the table have been rounded to the indicated precision.

Credit distribution is:

MAPF Credit Analysis 2011-5-31

DBRS Rating

Weighting

Pfd-1

0 (0)

Pfd-1(low)

47.1% (+3.9)

Pfd-2(high)

22.7% (-4.1)

Pfd-2

0 (0)

Pfd-2(low)

19.6% (-0.1)

Pfd-3(high)

6.5% (0)

Pfd-3

3.2% (-0.3)

Cash

+0.9% (+0.6)

Totals will not add precisely due to rounding. Bracketted figures represent change from April month-end.

A position held in ELF preferreds has been assigned to Pfd-2(low)

Liquidity Distribution is:

MAPF Liquidity Analysis 2011-5-31

Average Daily Trading

Weighting

6.8% (+6.8)

$50,000 – $100,000

11.0% (-6.9)

$100,000 – $200,000

36.1% (+0.9)

$200,000 – $300,000

15.3% (+0.5)

>$300,000

29.9% (-1.9)

Cash

+0.9% (+0.6)

Totals will not add precisely due to rounding. Bracketted figures represent change from April month-end.

MAPF is, of course, Malachite Aggressive Preferred Fund, a “unit trust” managed by Hymas Investment Management Inc. Further information and links to performance, audited financials and subscription information are available the fund’s web page. The fund may be purchased either directly from Hymas Investment Management or through a brokerage account at Odlum Brown Limited. A “unit trust” is like a regular mutual fund, but is sold by offering memorandum rather than prospectus. This is cheaper, but means subscription is restricted to “accredited investors” (as defined by the Ontario Securities Commission) or those who subscribe for $150,000+. Fund past performances are not a guarantee of future performance. You can lose money investing in MAPF or any other fund.

A similar portfolio composition analysis has been performed on the Claymore Preferred Share ETF (symbol CPD) as of August 31, 2010, and published in the September, 2010, PrefLetter. While direct comparisons are difficult due to the introduction of the DeemedRetractible class of preferred share (see above) it is fair to say:

MAPF credit quality is better

MAPF liquidity is a higher

MAPF Yield is higher

Weightings in

MAPF is much more exposed to DeemedRetractibles

MAPF is much less exposed to Operating Retractibles

MAPF is slightly more exposed to SplitShares

MAPF is less exposed to FixFloat / Floater / Ratchet

MAPF weighting in FixedResets is much lower

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